Introduction to GST Cancellation and Suspension Orders in India

GST registration is mandatory for businesses that meet the turnover criteria set under the Goods and Services Tax laws in India. Once registered, a business is expected to comply with all applicable GST provisions, such as timely return filing, correct invoicing, payment of taxes, and keeping proper records. However, if a business fails to meet these requirements or is found to be non-compliant, tax authorities can take strict action. The delay or removal of GST registration is one of these steps. This guide will help you understand everything about GST cancellation and suspension orders, their reasons, effects, processes, and preventive measures in simple and detailed language.

Understanding the Concept of GST Registration Suspension

GST suspension is not a permanent removal of registration but a temporary restriction placed on a business. The company can't make taxable goods or send out tax bills during this time. GST portal access for return filing is blocked, and input tax credit benefits are also restricted. The aim of suspension is to stop any more harm or misuse of GST rules until the problem is solved. The suspension will stay until the problem is sorted out or the registration is stopped.

What are the reasons for suspending a GST Registration

A business could have its GST registration taken away for several reasons. These are the most popular reasons:

Non-Filing of Returns

In the event that a taxpayer fails to submit GST returns for six consecutive months (in the case of monthly returns) or two consecutive quarters (in the case of quarterly returns under the QRMP scheme), authorities will take action. authorities can initiate suspension.

Significant Mismatch in Returns

Authorities regularly compare GSTR-1 and GSTR-3B filings. If there is a major difference in reported turnover or tax amounts, it may lead to suspicion of evasion or fraud, resulting in suspension.

Suspicious ITC Claims

Claiming input tax credit without proper invoices or without actual receipt of goods or services is a major cause for suspension. If the supplier is found non-compliant or fake, it affects the recipient’s eligibility too.

Inaccurate Registration Information

Providing incorrect business details such as wrong address, fake PAN or Aadhaar, or misreporting of turnover during registration can trigger suspension upon detection.

No Business Activity After Registration

If a person takes GST registration but does not start business within six months, it is a valid ground for initiating suspension.

Discrepancies in E-Way Bills

If the outward supplies reported in E-Way Bills do not match the returns filed under GSTR-3B, or if E-Way Bills are not generated for movement of goods, it may lead to suspension.

Non-Response to Department Notices

If a business fails to reply to GST notices such as notice for mismatch, notice for audit, or show cause notice within prescribed timelines, suspension may be ordered.

Unauthorized Transactions

If the taxpayer carries out prohibited or illegal transactions, or charges GST without actual supply of goods or services, it may result in suspension.

What Happens During GST Suspension Period

Once suspended, the taxpayer cannot:

• Make taxable supplies
  
  
• Issue tax invoices
  
  
• Collect tax
  
  
• File returns
  
  
• Claim input tax credit

All portal-related activities are locked. The business is unable to legally operate under GST until the issue is resolved and the registration is either reactivated or canceled.

Steps to Reactivate Suspended GST Registration

If your GST registration is suspended, it is possible to restore it by following a proper process.

Identify the Reason of Suspension

Check the notice or alert available on your GST portal login under "Notices and Orders". This will explain the exact reason for suspension.

Take Required Action

File all pending returns. Rectify any mismatches or discrepancies in tax filings. Submit the necessary documents or clarification as required.

Submit Reply

In case of a notice (Form GST REG-31), reply within 30 days using Form GST REG-18. Provide all evidence and documents to support your case.

Wait for Final Decision

Once you submit a reply and correct the issues, the officer will examine the case. If the conditions are met, the suspension will be revoked, and registration will be reinstated.

Cancellation of GST Registration

Reasons for GST Registration Cancellation

The GST authorities or the business itself may instigate the cancellation of GST registration for a variety of reasons. Some of the common reasons for cancellation of GST registration are:

1. If a company does not file its GST returns, non-filing charges will apply (Section 29(2) of the CGST Act).
   Failure to file GST returns for six months may result in the cancellation of a business's GST registration. Persons are allowed to cancel their registration if they have not filed returns, under Section 29(2) of the CGST Act, 2017.
   
   
2. Section 29(1) of CGST Act talks about Cancellation (Search this book for the related rule).
   Businesses may end their GST registration by choice when they no longer fit the standards for registration such as having less turnover than required or stopping their operations. Information about voluntary cancellation is available under Section 29(1) of the CGST Act.
   
   
3. A person who fails to follow the provisions of the GST.
   If the business fails to fulfil GST conditions, the GST authorities might deregister it. It happens when a company does not keep proper records, pay bills when they should or work with auditors or inspectors.
   
   
4. Fraud (CGST Act Section 29(2))
   If a business breaks the law, for example by avoiding taxes or creating false invoices, the GST department may terminate its registration. Including, misrepresenting or withholding facts is taken as a severe offense in Section 29(2) of the CGST Act.

5. Closure of Business

A firm may seek GST registration deletion if it closes owing to insolvency or strategic considerations.

Process of Cancellation by GST Officer

Show Cause Notice in REG-17

If the officer believes cancellation is necessary, a notice in Form REG-17 is issued asking the taxpayer to explain why registration should not be canceled.

Reply in REG-18

The taxpayer must respond to Form REG-18 within 7 business days. Documents and explanations must be provided.

Final Order in REG-19

If no reply is received or the officer is dissatisfied Form REG-19 is used to cancel.. It includes the effective cancellation date.

Drop of Proceedings in REG-20

If the Official issues Form REG-20 to end proceedings for good cause.

Voluntary Cancellation by Taxpayer

A registered taxpayer can also apply for cancellation voluntarily if:

• Business is closed permanently
  
  
• Turnover falls below the threshold
  
  
• Change in legal structure (e.g., proprietorship converted to company)
  
  
• Transfer of business ownership

Application Process

File Form REG-16 on the GST site within 30 days after company closure or other event. Details such as stock held, tax liabilities, and input tax credit reversal must be provided.

Final Return GSTR-10

Within three months from the cancellation date, GSTR-10 must be filed to settle all outstanding dues and provide final stock and tax information.

Revocation of GST Cancellation

If the registration is canceled by the officer and the taxpayer believes it was done unfairly, they can apply for revocation.

When Can Revocation be Filed

• Only applicable if the department did cancellation.
  
  
• Please submit your application within 30 days after the cancellation order.
  
  
• All outstanding returns and dues must be filed and paid.

Revocation Application Process

1. Fill out GST Form REG-21.
   
   
2. Unsatisfied officer may issue REG-23 notice.
   
   
3. Taxpayer must reply in Form REG-24 within 7 working days.
   
   
4. Final REG-22 order accepts or rejects revocation.

Preventive Measures to Avoid Suspension or Cancellation

Businesses can avoid suspension or cancellation by following proper GST compliance practices.

File Returns Timely

Ensure GSTR-1, GSTR-3B, and annual returns are filed on or before the due dates. Consistent delays may trigger notices.

Maintain Accurate Records

Keep all invoices, purchase records, and accounting documents in order. Reconcile input and output tax data monthly.

Match GSTR-1 and GSTR-3B

Make sure that the outward supplies and tax amounts reported in GSTR-1 match the summary data in GSTR-3B.

Verify Suppliers

Transact only with GST-compliant vendors. Ineligible or fake suppliers can affect your ITC eligibility.

Respond to Notices Promptly

Never ignore departmental notices or communications. A timely and well-drafted reply can prevent escalation.

Update Details

Update any change in business address, contact, ownership, or structure promptly on the GST portal.

Conduct Internal GST Reviews

Periodic internal audits or reviews can help identify mistakes in filing and documentation.

FAQ

1. What are the common reasons for GST registration suspension?
   GST registration can be cancelled if returns are not filed, if there are errors in the return data, if someone makes fake ITC claims, if no business is started following registration or if GST notices are ignored.
   
   
2. Can I operate my business during the GST suspension period?
   After suspension of your GST registration, you cannot produce tax invoices, submit returns or collect GST until the suspension is over.
   
   
3. How do I reactivate my suspended GST registration?
   You need to identify the reason for suspension, file pending returns, respond to any notices, and submit Form GST REG-18 to resolve the issue. Once approved, your registration becomes active again.
   
   
4. What is the process for cancellation of GST registration by tax authorities?
   The officer sends a show cause notice (Form REG-17), and the taxpayer must respond (Form REG-18) within seven working days. If unhappy, the officer cancels the registration using Form REG-19.
   
   
5. How can I apply for the voluntary cancellation of GST registration?
   You may cancel by submitting Form REG-16 via the GST site. This is suitable for businesses that have shut down, transferred, or fallen below the threshold limit.
   
   
6. What is the final return after GST cancellation, and when does it become due?
   After cancellation, you must file Final Return GSTR-10 within three months to declare closing stock and settle tax liabilities.
   
   
7. Can a canceled GST registration be restored?
   Yes, if canceled by authorities, you can apply for revocation within 30 days using Form REG-21. You must first submit any pending returns and settle any outstanding balances.